Downward pressure on rupee to continue: AV Rajwade

The rupee will remain under pressure for the foreseeable future, said AV Rajwade of AV Rajwade and Co in an interview to CNBC-TV18.

He added that the Reserve Bank of India (RBI) faced a dilemma between letting the rupee fall to cope up with the USD 100 billion current account deficit (CAD) and inflationary pressures due to the same. The Indian rupee was at its lowest level in 10 months as it hit 56.17/18 per dollar on Wednesday against 55.95/96 on Tuesday. Also read: Buy Indian rupee; target 56.40: Way2Wealth Below is the edited transcript of his interview to CNBC-TV18 Q: What would your expectation be on the rupee this morning after it breached 56/USD level yesterday? A: Rupee will remain under pressure for the foreseeable future. I must clarify that I am not an intraday trader; I do not have the trader’s view. I look at more fundamentals and from that perspective the downward pressure will remain. The Reserve Bank of India (RBI) is on the horns of a dilemma. They know very well that we cannot sustain USD 100 billion deficit on the current account (CAD). To make the economy more competitive in global market, they need a rupee fall. On the other hand they also know that the rupee fall would mean inflation. Therefore, they are on the horns of a dilemma and I do not envy them in terms of decision making that they will need to do in coming month. We have allowed the problem to become too big. To believe that the rest of the world will continue to finance it forever, I do not think is a very well assumption.